2018 (5) TMI 1177 - HC - Income Tax

TDS liability u/s 192 - amount paid towards part payment of tuition fees of children of its employees made to Anandalaya Education Society, which imparts education - perquisite in the hands of the employees of the assessee, as per provision of Section 17 2 - Held that - Contributions to the Anandalaya Education Society is towards the deficit of the fees towards wards of the employees, and therefore, rule 3 e would not apply to the facts of this case and hence, no perquisite would arise in the hands of the employees for the assessment years in question. The legislation amended the said rule only for subsequent period to include even concessional education facility. Therefore, Rule 3 2 read with Section 17 of the Act cannot be said to have been violated and the assessee cannot be held liable to recover tax under Section 201 1 to the extent the tax is due from its employees. Hence, findings of the Tribunal that assessee has failed to deduct tax at source on such contributions in terms of provision 192 read with Section 17 of the IT Act appears to be not correct or legal. Assessee cannot be said to be a defaulter of the amount and liable under Section 201 1 of the I.T Act or to make payment of interest leviable under Section 201 1A of the Act. - Decided in favour of assessee.

Summary

Issues:
Challenging an Order by the Income Tax Appellate Tribunal regarding assessment years 2001-2001 and 2001-2002.

Analysis:
The appellant, a Cooperative Milk Marketing Federation, filed returns for the mentioned assessment years. The Assessing Officer found that the appellant had not treated the amount paid towards tuition fees of employees' children as perquisite, leading to a notice under relevant sections of the Income-tax Act. The appellant contended that the contribution was a concessional education facility, not a perquisite. The AO issued a demand notice, leading to an appeal before the CIT [A]. The CIT [A] upheld the order, prompting the appellant to move the Tribunal, which also dismissed the appeals.

The High Court admitted the appeals to consider whether the contributions made to Anandalaya Education Society were perquisites in the hands of employees. The appellant argued that the contributions were to recoup the deficiency of the society, not for educational expenses of employees' children. The Revenue contended that the contributions attracted Section 17 [2] of the Act, making the appellant liable for TDS. The Court examined the income and expenditure details provided by the appellant, showing contributions towards the deficit of educational expenses of employees' children.

The Court analyzed Rule 3 [e] of the Rules, emphasizing that it applies to free educational facilities, not concessional ones. The contributions made by the appellant were towards the deficit of fees, not as perquisites. The Court concluded that the appellant did not violate Rule 3 [2] read with Section 17 of the Act, and thus, was not liable to recover tax or pay interest under the Act. The judgment cited by the Revenue was deemed inapplicable to the case at hand. Consequently, the Tax Appeal was allowed, and the Tribunal's order for the mentioned assessment years was quashed and set aside.